Enron Corp. - University of California | Office of The President

ooked the transaction as a loan." However, Enron kept the loans off its balance sheet by
accounting for the loans from CS First Boston and CitiGroup as "assets from price risk
management" and as "accounts receivable."
46. The secret offshore JP Morgan "Mahonia" and CitiGroup "Delta" transactions
substantially increased in monetary amount at the end of 00 and then during 01 as Enron's stock price
began to decline sharply and pierced certain of the higher priced equity issuance triggers, and the
structure of the Raptor SPEs threatened to collapse for lack of credit capacity. JP Morgan and
CitiGroup knew that this created the threat of a death spiral for Enron. Also, by this time Enron's
accumulated financial chicanery had created a liquidity crunch inside Enron, which made Enron
increasingly desperate for additional cash to try to stave off its growing liquidity problems. Enron,
JP Morgan and CitiGroup substantially increased the amount of money flowing to Enron in the
disguised loan transactions they were engaging in, i.e., the phony commodity oil and gas trades and
swaps. By so doing, JP Morgan and CitiGroup were able to secretly prop up Enron's deteriorating
finances without any disclosure that in fact Enron had just borrowed between $4-$6 billion from
those two banks. Had these phony commodity and swap transactions in fact been treated as the bank
loans that they really were, the internal procedures at JP Morgan and CitiGroup would have required
a syndication of those loans to other lending institutions – but that would have greatly increased the
scope of knowledge of the liquidity problems Enron was then encountering. Also, any attempt to
even put together loans of this size, either by JP Morgan or CitiGroup (individually or collectively),
would have quickly become public knowledge in the financial community and been reported in
specialized journals which follow bank lending syndication activity. And because of the high profile
of Enron and the controversy over its finances, attempted borrowings of this size would have been
reported on by the financial press. This would not only have called into question the health of
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